Will buy-to-let investment be hit by the 2016 budget?

There is no doubt that the 2016 budget would have had a negative impact on buy-to-let investors. There will still be a tax rate of 28% for all capital gains on buy-to-let as well as a 3% increase in stamp duty on additional properties.

So why are buy-to-let investors being hit so hard?

As part of the spending review, they made it clear that they wanted to help first time buyers as well provide the right support for those who own low-cost homes. Therefore, the government will raise revenue as a result of the stamp duty increase and this will allow them to invest this into those areas where second homes are causing problems as well as increase the budget for affordable housing.

What was the reaction of those investors?

As expected, investors are not happy. They see at as an attack on the sector. The announcement did result in a rush for property before the stamp duty came into effect in April 2016. There was also an increase in property prices of around 7.9% and this was mainly down to the fact that buy-to-let investors anticipated these measures that were brought in to penalise the sector.

Should people purchase buy-to-let property now?

Luckily for those who want to purchase buy-to-let property, things are still looking good. Returns on investment still look relatively promising and with interest rates still at an all-time low perhaps it is not the time to panic. To add to this, mortgage acceptance rates are also at a record high so now is the time to apply if you want to purchase a buy-to let property.

Emerging Markets for Buy-to-Let Investment

Liverpool is seen to be a buy-to-let hotspot. It has a great student population with a number of high profile universities and the students are looking for high quality student accommodation that has good amenities. Many of the students also go on to work in the city which means that the demand for rental property is even higher. In Liverpool, research has found that buy-to-let property returns some of the highest yields which is around 5.16%. The city has undergone multiple changes in recent years and there are further plans for the future, all of which will help to bolster interest.

Student accommodation around the UK

For investors considering student property investment beyond the boundaries of Liverpool have many other cities to consider. Birmingham is a reliable choice and is known to be the number one buy-to-let area. This is down to the fact that property is priced low while yields are high. Birmingham is going through a regeneration and this has helped to increase its desirability and demand.

It also has five reputable universities with a total of more than 65,000 students. Therefore, student property is a very lucrative investment for those looking to invest.

Why not invest in property that is exempt from the stamp duty increase

Some investors will want to find a way around the stamp duty increase and they will be pleased to know there is one. Investing in car parks is one option because it is seen as a commercial property and at a price of around £25,000 they do not come close to the stamp duty threshold. These investments are low risk and they offer a good income that can be relied upon. In places such as Gatwick Airport it will mean that demand is high and they can return a net income of 8% over five years.

On the whole the budget did not help buy-to-let investors but it is still possible for those who want to invest to invest in property because the environment is still encouraging.

Mark Burns

Mark Burns is a Director and Property Investment Consultant at Hopwood House. With over 10 years' experience in property investment, Mark has provided investors with a wide range of opportunities in exotic locations around the world.

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